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ABANDONED PROPERTIES Banks back Medford's blight proposal But they balk at language they find vague Comment By Damian Mann Mail Tribune Follow @@reporterdm MailTribune.com By Damian Mann Mail Tribune Follow @@reporterdm Posted Jun. 24, 2016 at 4:09 PM Updated Jun 24, 2016 at 4:38 PM By Damian Mann Mail Tribune Follow @@reporterdm Posted Jun. 24, 2016 at 4:09 PM Updated Jun 24, 2016 at 4:38 PM » Social News A bank official says local banks support proposed city rules that would come down hard on lenders who own abandoned houses and create blight in neighborhoods. But Ken Trautman, chief executive officer of People’s Bank and former chairman of the Oregon Banking Association, said the proposed language in a city ordinance is too vague about the ownership of a property. Despite this reservation, Trautman said local banks would support an ordinance to deal with abandoned properties and want to make sure the ordinance has some teeth in it. “We think it’s a good ordinance, but you have to be careful about your definition of who an owner is,” Trautman said. The Medford City Council has been discussing an ordinance that would give the city greater authority to go after the owners of abandoned or nuisance properties. Last Thursday, the council had planned to give the city attorney’s office direction about the proposed ordinance, but it decided to postpone action until it had a chance to meet with a local banking representative. The council wants to go after an estimated 436 mostly bank-owned vacant houses that often attract vagrants and drug users and create a nuisance for neighbors. In May, the Oregon Bankers Association sent the city a letter opposing the wording in the ordinance, saying it could create “unintended consequences” because the definition of owner would encompass a variety of individuals and lenders who may not have any significant interest in the property, including the holders of easements such as utility companies. Medford police Sgt. Don Lane explained to the council last week how difficult it is to go after banks and how long it takes. “This is a major problem for us to deal with vacant properties,” Lane said. “It’s hard to find who owns these properties.” Since 2009, the city has issued more than 80 citations on a house at 1866 Springbrook Road. Lane said residents living nearby have pleaded with police to do something about the property, which has been a drug house, has attracted squatters and has prompted multiple calls for accumulation of junk. Lane estimates police have spent about $6,000 in man-hours at the house over the years, much of it trying to determine ownership of the property because various lenders have been involved. “We were spinning our wheels about who owns this property,” Lane said. Finally, in the past month, officers spoke to a lawyer representing HSBC Bank, and within a day, the bank had agreed to clean up the property, Lane said. City officials are considering implementing a little-known, 1989 state law that allows cities to foreclose on properties that have become a threat to the health and safety of a community. Under the law, the city or another agency can initiate a receivership action against a problem property. Once the city or other agency gains control, it can begin to rehabilitate it, potentially qualifying for grants and other federal programs. Just the threat of foreclosure can be enough to get a bank to clean up a property, said Kevin McConnell, senior city attorney. McConnell said that in many cases, lenders make more money collecting mortgage insurance payments on a house than they would if they sold the property, which is an incentive for them to keep the so-called "zombie houses" abandoned. Because it’s so difficult to determine ownership of a property, McConnell said, the proposed ordinance would notify “interested parties,” which is a broader and more encompassing term. Trautman said his bank doesn’t have any foreclosures on its books, but he said that a majority of the loans that originate at People’s Bank are sold to a secondary lender. Some national lenders could be difficult for local authorities to contact. “I would not disagree that we have a few very large banks that are unresponsive,” he said. Trautman said his bank might make $2,000 selling a loan to a larger bank, so a $5,000 penalty from the city on a property abandoned by a homeowner would be excessive. “You can’t have fines that exceed your income,” he said. If the city did have a foreclosure procedure that roped in all lenders that have been involved in a property, Trautman said, his bank would have to take out mortgage insurance, a cost that would be passed on to the consumer. Despite his concerns, Trautman said he thinks the city could come up with a tough ordinance that works for local bankers. “You’ve got to have penalties with some teeth in it,” he said. Reach reporter Damian Mann at 541-776-4476 or [email protected] . Follow him on www.twitter.com/reporterdm . By Damian Mann Mail Tribune Follow @@reporterdm MailTribune.com By Damian Mann Mail Tribune Follow @@reporterdm Posted Jun. 24, 2016 at 4:09 PM Updated Jun 24, 2016 at 4:38 PM » Comment or view comments Reader Reaction » STAY INFORMED Email NewsLetter Sign Up Today Sign up for our newsletter and have the top headlines from your community delivered right to your inbox. Southern Oregon Directory Featured Businesses Loading... 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